MERSEYSIDE rail users will be going Dutch for the next quarter of a century.

A Netherlands-based consortium was yesterday confirmed as the preferred bidder to run the Merseyrail network.

Ned Railways, who run the Dutch national network, has teamed up with the Serco Group, who run London's light rail system, to win the 25-year £3.6bn contract.

Details should be finalised in the next two weeks with the new team replacing Arriva Trains Merseyside at 2am on July 20.

Huge financial penalties and bonuses have been written into the terms of the contract to keep Merseyrail punctual and reliable.

Transport chiefs want an end to the days when the network was rechristened "Miseryrail" by frustrated commuters.

The award of a 25-year-contract will enable longer term investment to be made into the ageing network.

Merseytravel's chief executive Neil Scales said: "Investment takes so long to come through in railways that we needed this length of contract.

"But there will be a review period after seven years and every five years after that.

"We need to make sure the people of Merseyside are satisfied with the service and there are always get-out clauses in contracts.

"We have set very high targets but they are willing to meet them.

"It will be very hard for them to earn big bonuses but if they do, it will be money well spent because the improvement will be there to see on the ground."

If the operator is fined for poor performance the money can now be ploughed straight back into Merseyside instead of going to the Treasury.

Merseytravel is the first passenger transport authority in the UK to win the right to award its own rail franchise.

All current staff will transfer to the new operator and no compulsory redundancies are expected.

The Dutch company was chosen from a shortlist of three bidders. A second bidder - Keolis of France - is in reserve.

Mr Scales said: "Merseytravel and the SRA were impressed with the calibre of all the bids, but eventually decided that Serco and Ned Railways is the group that can best provide the high quality service the people of our region expect.

"There isn't another organisation in the country that has been given these powers. We're obviously grateful for the support we have had from the Strategic Rail Authority and the Government.

"I would, however, ask people to be patient. We can't make improvements overnight."

Patrick Verwer, bid director for Serco/Ned Railways, said: "Our partnership with Merseytravel will be crucial in delivering a top class rail network for Merseyside.

"In the lead up to being awarded the concession we have worked closely with Merseytravel and found them to be an excellent partner.

"I am confident that together, we will be able to create a rail network for Merseyside of which passengers and staff can be proud."

The awarding of the new franchise is just the first in a series of major changes to the Merseyrail network.

All 59 Merseyrail trains, which date back 25 years, will be refurbished by December 2004 in a £32.4m programme.

The first - complete with distinctive new grey livery with a bold yellow M - arrived in Liverpool this week.

Angel Trains, the company which owns Merseyrail's rolling stock, has won a contract extension to 2015, and will lease the trains back to the new operator.

"We're not just giving these trains a lick of paint. This will give the people of Merseyside a Millennium railway not a 1970s railway," said Mr Scales.

Government money is also paying for the rebuilding of 25 of the 80 stations on the Merseyrail network, at a rate of five a year.

Tenders will be submitted shortly for the first five which include Sandhills and Newton-le-Willows.

Ironically, the new Merseyrail operator was announced on a day when it was revealed Merseyside's 215 train drivers are to be balloted for strike action.

Driver's union Aslef is angry that rest-day working agreements have been signed with individual members in the region, rather than with the collective body.

Aslef's North West officer Chris Smith said: "We'd expect the new operator to have a full meeting with all the unions so we can see their business plan. Our one concern is that normally you win the bidding process by promising to use the least amount of subsidy.

"We believe they need more drivers on the network, not less.

"We have had some difficulties with Arriva but on the whole they were trying to create a system that is run in an efficient way and with the right establishment of staff."

Arriva Trains Merseyside, whose performances have ironically improved in the last few months since being ruled out of the running for the new network, declined to comment on yesterday's decision.